Regulators are concerned that cryptocurrency markets are still open to wide manipulation in an environment where just 5 percent of Bitcoin spot trading is not faked by unregulated exchanges, according to a Bitwise study.

Crypto-asset management firm Bitwise, which was seeking to list Bitcoin exchange-traded funds (EFTs), said in a March report to U.S. financial regulators that about 95 percent of all trading volume on 71 out of 81 exchanges analyzed had been faked.

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This was done through techniques such as wash trading, in which someone simultaneously buys and sells the same asset.

High listing fees of between $1 million and $3 million are usually the motivation behind these manipulations as companies offering new initial coin offerings want exchanges with more active trading.

#Bitcoin has the potential to quickly grow into the biggest #environmental problem of our time. Most of the trading volumes may be fake, but the energy use is very real. At a price of $150k, the network could support an elec energy requirement equal to 7.5% of global consumption. https://t.co/tQRncBcNhu

Bitwise did the analysis to show regulators that “a real market for Bitcoin” still existed despite the mess that was the manipulated data, said Matthew Hougan, Bitwise global head of research, in a Wall Street Journal interview.

“When you cut away the echo chamber of these nonsense numbers, it should be an efficient, well-arbitraged market,” Hougan said.

Fake Bitcoin trading is common

Cases are common of scammers running fake cryptocurrency trading sites that have defrauded thousands of investors from around the world. This has forced a number of regulators to hold back approval for EFTs and delayed what is seen by enthusiasts as broader adoption of the technology by investors.

The 5% of bitcoin trading volume that is real is still $billions

Also note that fake volume doesn’t manipulate the bitcoin price, it’s used by bad exchanges to scam altcoin scams pic.twitter.com/M7qxK9iOpQ

“This data shows that Bitcoin is capable of highly efficient outcomes at a much lower scale,” said Michael Casey, a senior advisor for blockchain research at MIT’s Digital Currency Initiative, in an opinion piece.

“All of those efficiency gains occur because Bitcoin eliminates the fee-charging trusted intermediaries that carry out a variety of back-office execution and settlement processes within the legacy financial system.”